Market Overview

First Solar Earnings Preview: Keeping an Eye on the Project Pipeline

First Solar (NASDAQ: FSLR), shares of which have been on a run since revised, upbeat guidance was announced in early April, is scheduled to report its first-quarter 2013 results Monday, May 6, after the markets close.

Investors will be interested in whether First Solar has enough projects in the pipeline to support the upbeat guidance, as well as any update on the expansion into emerging markets, particularly on the heels of the recent acquisition of Solar Chile.

Expectations

Analysts on average predict that First Solar will report revenue for the quarter that totaled $725.26 million, which would be almost 46 percent higher than in the year-ago quarter. Earnings of $0.75 per share are also in the consensus forecast. That compares to a reported net loss of $0.08 per share in the comparable period of last year.

But note that the consensus earnings per share (EPS) estimate has fallen in the past 60 days ago from $0.84. However, First Solar easily exceeded consensus EPS expectations in the past three quarters. The surprise loss in the year-ago quarter was the only net loss since at least 2007. In the most recent report, EPS beat expectations by more than 16 percent.

The CEO said in the fourth-quarter report, "Despite a very challenging market environment, we continued to make meaningful progress in all critical value drivers for the Company. ... We expect the market will remain turbulent for some time to come, but we have seen some evidence of improvement." But the share price fell more than 21 percent in the days following the report.

Looking ahead to the current quarter, the forecast currently calls for a sequential increase but a year-over-year decrease in earnings to $1.16 per share. That EPS estimate has ticked down in the past 60 days as well. And revenue for the quarter is expected to be essentially the same as in the year-ago period. But so far the full-year revenue is forecast to be almost 14 percent higher, relative to a year ago.

The Company

Solar energy solutions provider First Solar operates in two segments. The Components segment designs and manufactures solar modules that convert sunlight into electricity. The Systems segment provides turn-key photovoltaic solar power systems to the like of utilities, power developers and industrial companies.

The company was founded in 1999 and its headquarters are now in Tempe, Arizona. First Solar is a component of the S&P 500, and it has a market capitalization of about $4 billion. James A. Hughes has served as chief executive officer since May 2012.

Competitors include SunPower (NASDAQ: SPWR), which reported better-than-expected first-quarter results last week, and Chinese Suntech Power (NYSE: STP), which is in insolvency proceedings has not released quarterly results since the second quarter of 2012.

During the three months that ended in March, First Solar reported record sales for 2012, was a speculated takeover target following a low-ball offer from TRC capital, announced it would acquire the Macho Springs Solar project in New Mexico and finalized the purchase of Solar Chile, a solar systems developer.

Performance

First Solar's forward earnings multiple is lower than the industry average price-to-earnings (P/E) ratio. The company's operating margin is better than the industry average, but note that the return on equity and return on investment are both in the red. The price-to-book (P/B) ratio is about 1.1.

The number of First Solar shares sold short, as of the April 15 settlement date, was the second highest so far this year and represents more than 30 percent of the float. But days to cover slipped in the most recent period to less than two.

Only two of the 27 analysts surveyed by Thomson/First Call that follow the stock recommend buying shares. For the past three months, the consensus recommendation has been to hold shares. The share price has overrun the analysts' mean price target, or where they expect the stock to go. But a positive earnings surprise or even more rosy guidance might prompt hikes in analysts' target prices.

The share price is more than 43 percent higher year-to-date and reached a 52-week high last week. It is well above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed the broader markets, but it has underperformed SunPower.

Posted-In: First Solar Solar Chile SunPowerEarnings Long Ideas Short Ideas Previews Trading Ideas Best of Benzinga

 

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